Social media has become a very popular medium for local businesses. According to Vendesta, 44% of local businesses rely on social media and 41% claim it drives revenue. However, many companies waste a lot of resources on ineffective social media strategies.
Small businesses should do a couple of things while running a social media campaign. These include making sure they are receiving a decent ROI from their social media marketing efforts and identify areas where they should be improved upon.
With that in mind, here are some guidelines to follow when evaluating your social media strategy.
Estimating the ROI of Your Social Media Strategy
Measuring the ROI of your social media strategy is more difficult than gauging the effectiveness of an AdWords campaign. When you are running a performance CPC campaign, you can easily track costs and estimate revenue based on the value of each lead. It is more difficult with social media marketing, because most of your time and resources will be allocated to branding efforts.
Nevertheless, you can follow the template below to measure the ROI of your social media campaign. Social Media Examiner has an article with some great tools, but it is more accurate to calculate it yourself.
Create Intermediary Conversion Goals
What do you hope to accomplish with your social media campaigns? Obviously, your long-term goal is to use social media traffic to boost your brand image (thereby warming followers up for future sales pitches) or directly converting social media visitors into paying customers. However, you will need to set some smaller goals to achieve this. These goals can include:
- Earning followers on Facebook and other social networking sites
- Driving visitors to your site
- Downloading white papers
- Fill out a contact form
- Making a purchase
Aside from making purchases, each of these steps may be an important part of your conversion funnel.
There are a lot of great tracking platforms that can help you determine whether you are reaching your goals. Google Analytics, CPV Lab, Buffer and Prosper 202 are all popular tracking tools.
Assign a Value to Your Conversion Goals
You must also decide what each conversion is worth. This is the most difficult part of the process, because it is so subjective. The average CPA of a sale, your gross margin and the likelihood that a particular action will translate into a sale must be taken into account.
For example, let’s assume that the average person that downloads a white paper makes a $100 purchase. You operate on a 40% profit margin, so you generate $40 in gross profit from every sale. One in 20 of the people that download a white paper will make a purchase. This means that the value of a conversion (someone downloading a white paper) is $2. If you got 2,000 visitors from your social media profiles to download white papers, then that is the equivalent of earning $4,000 in sales for the purposes of these calculations.
Estimate the Investment and See if it Was Worth While
You need to calculate your total investment in your social media strategy. This includes both time and money. If you are doing a lot of the work yourself, then you need to decide what your own hourly rate is worth and add that to your estimated investment.
Let’s assume you spend $500 on advertising, $100 on tracking software and 100 hours of your time. Your time is worth $50 an hour. This means that your total investment will be worth the equivalent of $5,600. The 2,000 leads that you generated from white papers isn’t enough to justify the time you spent.
Getting a Greater Benefit from Your Social Media Marketing
If you aren’t satisfied with the ROI of your social media marketing strategy, then you likely need to either be generating more revenue from it, or be more efficient with your time and money. However, sometimes you will need to consider a combination of these two approaches to maximize your ROI from social media marketing.
Additionally, you should consider tracking the performance of different social networking profiles. If you see that some profiles are not generating conversions for you, you should cease to use them and invest your time on the ones that work. At the least, you may want to keep them active for branding purposes but spend your time and money on the ads or posts that are driving the bulk of your conversions.
You should also be setting up landing pages for different types of traffic. Your landing page needs to provide a seamless transition from your traffic source to your value proposition. Lastly, you should consider analyzing the value of your paid social media marketing tools. If they aren’t paying for themselves then you should cancel your subscription.
There are a lot of things that you can do to improve the ROI of your social media campaign. However, you won’t know whether it is necessary to use them unless you take the time to gauge your strategy’s effectiveness.